refinancing a home loan

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Second mortgages can be a great way to use the equity in your home to free up cash for important needs. Just like any other loan, there are some essential components you should know about second mortgages before you begin the application process.

What Is a Second Mortgage?

Generally, a second mortgage allows you to borrow against the equity in your home, and your home is used as collateral for the loan. This loan is called a “second mortgage” because it comes in second lien position behind the existing loan on your property. Second mortgages can be easier to qualify for than other types of loans and are often used to secure additional funds.

“Second mortgages can give you access to the equity in your home without having to touch your first mortgage,” says Scott Bridges, Senior Managing Director of Consumer Direct Lending at Pennymac. “Depending on your financial needs, second mortgages can be provided in lump sums or similar to a credit line where you can spend and repay over time.”

What Can I Use a Second Mortgage for?

There are numerous ways to use your second mortgage. “We see many of our customers pursue a second mortgage to consolidate high interest rate credit card debt or do home improvements,” Bridges says. Some of the most popular ways to use a second mortgage include:

  • Paying for home improvements. A second mortgage provides an opportunity to reinvest in your home. Making significant home improvements is generally considered the soundest reason to acquire such a loan because the home’s value should increase and reflect your financial investment.
  • Funding an education. The equity in your home can provide a substantial loan to fund educational opportunities for yourself or your children.
  • Covering healthcare costs. Unexpected healthcare costs can cause significant financial strain. A second mortgage may offer a lower-interest loan option than other loans available.
  • Debt consolidation. A second mortgage may be a good option for paying off debt from multiple high-interest credit cards. You’ll streamline your payment by eliminating credit card payments, and as long as your second mortgage interest rate is lower than the credit cards—which it usually is—you’ll save money.

How Does a Second Mortgage Work?

A second mortgage requires an additional mortgage to be taken out on a property that is already mortgaged.

Types of Second Mortgages

A home equity loan and a home equity line of credit are the two types of loans that fall under the broad, informal category of “second mortgage.” Both of these use your home as collateral, but there are some nuances between them. Let’s take a look at each.

  1. Home Equity Loan. A home equity loan is a traditional loan, meaning that a fixed amount is lent to you for a fixed term, with payments amortized or spread over the life of the loan. You receive all your money in a lump sum when the loan closes. Home equity loans usually come with fixed interest rates.
  2. Home Equity Line of Credit. A Home Equity Line of Credit (HELOC) allows you to draw money as you need it, up to the maximum amount of your credit line, for a certain amount of time called the draw period. During the draw period, payments are typically interest only. Once the draw period ends, your payments are principal and interest, which are then amortized over the remainder of the loan term. Home equity lines of credit usually come with a variable interest rate.

How Do I Get the Money?

You can receive your funds in two different ways, depending on whether you have a home equity loan or a HELOC.

Lump Sum. A home equity loan is a standard second mortgage, a one-time loan that provides a lump sum of money you can use for whatever you wish. With this type of loan, you repay the loan over time, typically with fixed monthly payments. Incorporated into each payment is a portion of the interest, as well as a portion of your loan balance.

Credit Line. With a HELOC, you can get a lump sum of money at once and have a pool of funds you can draw from over time. You may be required to take out an initial draw (a lump sum paid out when the line is opened), but you also have the option to access additional funds if you want to at a later time. Your lender sets a maximum borrowing limit, and you can continue borrowing multiple times until you reach your credit limit. Just like with a credit card, as long as you haven’t maxed out your line, you can borrow over and over on a HELOC.

Is a Second Mortgage Different Than Refinancing?

Yes, a second mortgage is different from refinancing. A second mortgage is an additional loan on your home in which you borrow against your home’s equity. With a second mortgage, you’ll have two home loan payments—your original mortgage and the second mortgage.

Refinancing replaces your current primary mortgage with a completely new one. Homeowners often refinance their homes to take advantage of a lower interest rate, change a loan term or switch from an adjustable to a fixed-rate mortgage. Some people choose to do a cash-out refinance, which is refinancing a home loan for an amount higher than the existing loan balance. You can use the extra funds for renovations, debt consolidation, education or other expenses.

How Do I Get a Second Mortgage?

To get a second mortgage, you’ll need to apply for the loan and meet the lender requirements, which may be more stringent than your original loan. Lenders will want to be confident that you’ll be able to manage another monthly loan payment.

Approval criteria will vary by lender, but at a minimum, you’ll need enough available home equity, a high credit score and a low debt-to-income ratio (DTI).

Second Mortgage Rates: Getting the Most Competitive Rates

Second mortgage rates and terms differ by lenders. Compare your options to find the one that best fits your budget and goals.

Keep in mind that as with your original mortgage, certain factors like credit history and debt will come into play when determining your rates. You’ll also need some equity. Bridges says, “The way to get the best rate on a second mortgage is simply to have a strong credit score, a low debt-to-income ratio and equity in the home after the second mortgage is acquired.”

Is a Second Mortgage Right for You?

While there are many benefits to having a second mortgage, it is still incurring debt. You’ll have to weigh the pros and cons to decide if it’s your best decision. In many cases, it could be.

“From a financial planning standpoint, a second mortgage is a good idea when the homeowner has a significantly lower rate on their first mortgage than the current market,” Scott Bridges says. “Imagine you have a 3% first mortgage and need $100,000 to consolidate debt or do home improvements. Right now it’s typically smarter for homeowners to utilize the second mortgage to tap into their equity instead of refinancing their entire loan balance to today’s 6 to 7% rate range.”

Exploring Your Options for a Second Mortgage

The bottom line is that while second mortgages are common and convenient, it’s important to determine if they’re a good fit for you. If you’re ready to apply, get started by contacting a Pennymac Loan Expert to learn more about the second mortgage options available to you.

Source: pennymac.com

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Today we’ll check out Agora Lending, which like a lot of online mortgage lenders, says that by leveraging the latest mortgage technology, they’re able to pass the savings on to you.

This means they might have some of the most competitive rates in the industry, and they don’t simply state that fact – they post their daily rates online for all to see.

Instead of guessing, you can see where they stand in seconds by navigating to their website. They also tend to show up on mortgage comparison websites, so you may come across them that way as well.

For the record, the word agora is Greek and means a gathering place, which the company takes a step further and calls a place of gathering within a home.

Let’s learn more about them.

Agora Lending Fast Facts

  • Direct mortgage lender that offers home purchase and refinance loans
  • A division of One American Bank, a South Dakota-based depository
  • Founded in 2017, headquartered in Tempe, Arizona
  • Licensed to do business in all 50 states and the District of Columbia

Agora Lending is a direct-to-consumer mortgage lender based out of Tempe, Arizona that offers home purchase financing and refinance loans.

They are actually a dba of One American Mortgage, and also a division of One American Bank, a South Dakota-based depository.

As such, they are licensed to do business in all 50 states and the District of Columbia, which is a plus.

Because they operate online, you’ll be working remotely with one of their loan officers and loan processors to close your loan.

The good news is they use “next-generation mortgage software” to make it both faster and easier to get from start to finish. And in doing so, they may be able to offer you a lower rate.

How to Apply with Agora Lending

  • Call them up directly or fill out a short online form to get started
  • A loan officer will get in touch to discuss pricing and send you a link to apply
  • They offer a digital mortgage application and the ability to electronically complete and sign forms
  • Aim to close loans quickly and efficiently using the latest mortgage technology

To get started, you can simply call them up on the phone or fill out a short mortgage lead form on their website.

Either way, you’re going to need to speak to someone before you can formally apply for a home loan, which is a slight negative given available technology these days.

But it’s probably in your best interest to inquire about interest rates and pricing before you proceed anyway.

Once you speak with a loan officer, you’ll be sent a registration email that allows you to complete the loan application online via their digital platform.

Most tasks can be completed electronically, such as filling out the application and eSigning disclosures. You can also scan and upload necessary paperwork.

Once submitted, you’ll get updates in real-time as your loan progresses to the next step.

Loan Programs Available at Agora Lending

  • Home purchase loans
  • Refinance loans: rate and term and cash out
  • Conforming loans backed by Fannie Mae and Freddie Mac
  • High balance loans
  • Jumbo loans
  • FHA loans
  • VA loans
  • Fixed-rate and adjustable-rate options
  • They lend on condos/townhomes and investment properties

Agora Lending offers a lot of different loan options, including home purchase loans and refinance loans for all occupancy types.

You can get a rate and term refinance or a cash out refinance, and they lend on all property types, such as condos/townhomes and multi-unit investment properties.

It’s possible to get a conforming loan backed by Fannie Mae or Freddie Mac, or a jumbo home loan that exceeds the conforming loan limit.

They also offer FHA loans and VA loans, though these options may only be available for existing homeowners refinancing a home loan.

In terms of specific loan programs, you can get a fixed-rate mortgage in a variety of different lengths, from 10 years to 30 years and everything in between.

They also offer adjustable-rate mortgages, including 3/1, 5/1, 7/1, and 10/1 options.

All in all, they should have a product for most borrowers out there. The only major loan type missing appears to be USDA loans.

Agora Lending Mortgage Rates

One positive to Agora Lending is the fact that mortgage rates are front and center on their website.

Instead of wondering how competitive they, simply cruise over to their website and you’ll see today’s refinance and purchase rates.

No need to sign in or get in touch with a human first. From what I saw, their mortgage rates appeared to be pretty low, slightly below what big banks were advertising on the same day.

Of course, be sure to pay attention to the many loan assumptions in the fine print, such as required down payment, minimum credit score, max loan amount, and so forth.

And take them with a grain of salt because once your loan scenario is presented, rates could be very different. But this is the case with any lender that advertises generic rates.

Ultimately, I give them bonus points for being transparent, as many lenders do not display their mortgage rates online or elsewhere.

That being said, I can’t find anything about lender fees on their website, so it’s unclear if they charge a loan origination fee or other standard fees like processing and underwriting fees.

Be sure to inquire about both lender fees and interest rates when comparison shopping to get the complete picture.

Collectively, this is known as the mortgage APR and is very important to ensure you get an apples-to-apples assessment.

Agora Lending Reviews

On Zillow, Agora Lending has a favorable 4.61-star rating out of 5 from just over 300 customer reviews.

A good number of the reviews indicated that either the interest rate or fees/closing costs were lower than expected. And in some cases both.

Over at Bankrate, the company has a slightly higher 4.7-star rating from about 40 reviews, with most of them perfect 5-star reviews.

And 95% of those who reviewed the company said they would recommend them, which is a great sign.

Additionally, they have a strong 4.5-star rating on LendingTree (and 88% recommend rate), though it’s from a smaller sample size of around 20 reviews.

They have a less favorable 3.2-star rating out of 5 on Credit Karma from just over 50 reviews, with service an issue despite the low rates on offer.

Lastly, they have a ‘C+’ Better Business Bureau rating, which isn’t great. They also aren’t an accredited business, but their parent company has an ‘A+’ rating.

All in all, while Agora Lending has some mixed reviews, many former customers cite their low rates, which could be worth some of the aggravation on the customer satisfaction front.

As such, they may be well-suited for an existing homeowner with a straightforward loan scenario that is seeking a lower mortgage rate.

Agora Lending Pros and Cons

The Good

  • Offer a digital home loan process
  • Can apply for a mortgage online via their website
  • They display their daily mortgage rates online
  • Lots of loan programs to choose from
  • Licensed in all 50 states and D.C.
  • Have mostly good customer reviews

The Maybe Not

  • Do not offer USDA loans
  • Do not service their loans
  • Currently have a C+ BBB rating

Source: thetruthaboutmortgage.com

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Save more, spend smarter, and make your money go further

You’ve likely heard about the benefits of refinancing a home loan. With today’s low interest rates, those who have enough equity in their home and the credit required for a refinance could lower their monthly payments considerably.

But did you know that, similarly, you could lower your car payments by refinancing your auto loan?

A common misconception about auto refinancing is that it is similar to home refinancing in complexity and requirements, says Phil Reed, the senior consumer advice editor at auto information website Edmunds.com. The process is actually much simpler, in terms of both qualification criteria (there is more emphasis on the applicant’s credit than on the balance and value of the car, according to Reed) and the time and costs involved.

Here’s what you need to know about auto refinancing and how to determine whether it could help you save.

Are you a good candidate?

Thanks to today’s low interest rates, anyone who purchased and financed a car a few years ago could potentially find an auto loan with a lower rate. A few general guidelines:

* Is your current interest rate significantly higher than what you could get today?

In the fourth quarter of 2008, a 48-month new auto loan issued by a commercial lender averaged 7.06%. Today, the average rate on a 36-month used-car loan is 5.47%, according to Bankrate. And the average rate on a 48-month new car loan is 4.89%.

“Most people aren’t aware of the interest rates’ impact to their monthly payment,” says Reed. Edmunds and other online resources offer basic calculators that allow you to quickly determine just how significant a lower interest rate can be on a monthly loan payment.

* Has your credit score improved?

You could save even more if your financial situation has changed for the better – and your credit score is higher — since you took out that original car loan.

As with any loan, you do need good credit to qualify for auto refinancing. However, the criteria is far less stringent than that associated with home loans, says Reed. According to FICO (the company that calculates the widely-used FICO scores), you need a FICO score of 720 or more to qualify for the best auto loan rates. On a $25,000 36-month loan at 4.784% (the national average as of March 30, 2011), your monthly payment would be $747. On that same loan, you’d have a $828 monthly payment if your FICO score was between 620 and 659, which would put you at an average 11.762% interest rate, according to FICO.

* Are you in a lengthy loan (five- to eight-year term)?

Jack Nerad, executive editorial director and market analyst for Kelley Blue Book advises anyone in a lengthy auto loan (with an original five- to eight-year term), to research auto refinancing.

Many people only pay attention to their monthly payment when purchasing a car and have no idea how much of that payment is interest. The longer the term of the loan, the more interest you’ll fork over to the bank until it’s paid off, even if your monthly payment seems low. Refinancing into a loan with a shorter term will lower the total amount of interest you’ll pay, even if it doesn’t considerably lower your monthly payment.

Avoid Refinancing Your Auto Loan If:

* Your existing loan has a prepayment penalty or the new loan is fraught with fees that would negate the potential interest savings.

Anyone seeking an auto refinance should completely understand the details behind the new and existing loan terms, says Reed.

* Refinancing will extend the life of your loan.

Unless you’re seriously in danger of missing payments or defaulting on your loan altogether, avoid refinancing into a loan that would extend your current one. Your monthly payment may go down, but you’ll end up forking more money to the bank or dealer’s financing arm over the life of the new loan.

How to Get Started

Unlike refinancing a mortgage, auto refinancing is quite painless, according to Reed. It can often be handled online, and might take just one or two hours to complete. The first step is to understand your current loan terms (check your monthly statements for the interest rate, remaining balance, and payoff amount) — which you already should have done to determine if you’d benefit from refinancing to begin with.

Reed also advises informing your current lender that you are actively seeking a better deal. They may be willing to refinance your existing loan and save you from switching to a new a lender. As with any rate-based loan, negotiation is always an option, but Reed acknowledges that particularly when dealing with large banks, auto refinancing interest rates may be fairly fixed. Further, the person you are dealing with may not be authorized to make sweeping changes to your loan agreement.

Where to Look?

Ready to get started? Shop around on sites like Bankrate.com and eLoan.com, where you can find current rate information and lender referrals, if necessary. Reed recommends Capital One Auto Finance as another potentially good option. You can use Mint’s loan calculator with amortization table to determine how long a payoff period to expect with a refinanced loan.

Don’t ignore dealer finance programs, either. They are currently subsidized by auto manufacturers, making them a potentially competitive resource, according to Nerad.

Save more, spend smarter, and make your money go further

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Source: mint.intuit.com

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